Save money by avoiding Cash Advances

Beware the cash advance!

Some credit card companies offer their customers the chance to use their credit card as an ATM card. This is called a cash advance. To be more specific a cash advance is a loan taken out against a line of credit or credit card, typically imposing higher-than-normal interest charges.
Investopedia says,
Often the interest charged on these loans is a fixed number of percentage points above the prime rate. Additionally, there is seldom a grace period in which no interest is charged. These two factors make cash advances more expensive than many other types of debt financing.
I say that a cash advance is a shady way for credit card companies to make a quick buck. I did the research and if I were to use a cash advance on my credit card I would be charged $10 for the initial transaction, and interest would immediately begin to accrue. Last time I checked (just now) my credit card company (CHASE) charges me 20.99% for a cash advance. One must keep in mind that 20.99% is compounded daily. I'm going to follow this example with some math so, prepare yourself.

Here is an example. I take out $100, deciding to pay it back after I receive my statement, lets say in 30 days. I would be charged $10 for the transaction, and I would be charged $1.91 interest at the end of the thirty days. So after thirty days I would have to pay finance charges of $11.91. Much higher than your typical ATM fee of $2-5. If I fail to pay the entire cash advance balance I would have to pay even more in finance charges. Were I to pay back the initial $100 ignoring the finance charges I would then have to pay $12.12 i n finance charges. After 60 days I would have paid my bank $12.12 for a cash advance.

Here is the formula I used:
where P is the initial $100, r is the annual interest rate, n is the number of times the interest is compounded a year (365), and t is the number of years (30/365).

Avoid using a cash advance at all costs!

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